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Remittances to Africa: cutting the cost, harnessing the potential

16 April 2014 13:45 - 18:00 GMT+01 (BST)

Public event

Streamed live online

Description

On Wednesday 16 April ODI and Comic Relief brought together key
people from the world of banking, money transfers and politics (UK and African)
for an event on the huge cost to Sub-Saharan Africa of high money transfer fees.

Over the course of the afternoon attendees heard from three
panels, each of which covered remittances from a different angle.

Welcome from Kevin Watkins + 10 minute presentation of main finding of ODI new research paper

His Excellency, Mr Williams Nkurunziza, High Commissioner of Rwanda

Rushanara Ali MP, Shadow Minister for Education

Gibril Faal, chairman African Foundation for Development (AFFORD)

Glenys Kinnock introduced the discussion, highlighting the importance of remittances for families in Africa. She called on the Financial Conduct Authority to intervene.

Kevin Watkins and Maria Quattri presented the ODI report and its findings. Their presentation highlighted that remittances are a source of funds to invest in education, health, agriculture and starting business, or insure against crisis.

They showed the level of control Western Union and Moneygram have over the remittances market in Sub-Saharan Africa, leading to a virtual duopoly in many countries. They outlined the fee structures and some policy recommendations from their report.

His Excellency, Mr Williams Nkurunziza, High Commissioner of Rwanda described his shocked reaction to the report, describing the combination of remittance fees and cost of finance on the African continent as “holding the African poor in a state of perpetual poverty”.

He focused on how remittances help the needy in Africa and in Rwanda – decrying the fees as ‘irresponsible capitalism’. He offered his support for the recommendations outlined in the report, advocating for a fair trade in money transfer services.

Rushanara Ali MP, the UK Shadow Minister for Education, discussed another dimension of the remittances debate: the role they can play in countries where there is no formal banking system, such as Somalia. She played a leading role in the successful ’Save Remittance Giving’ campaign to challenge Barclays in their decision to shut down remittances to Somalia.

Her view was that there was a market failure in remittances, and that a long-term solution was needed for remittances to countries without banking facilities. This should be based around ‘legitimate pathways’ to get money in effectively and affordably, avoiding concerns about money laundering or terrorism.

The second session looked at strategies to lower charges,
and they could be summed up as competition and changes to regulations.

Dilip Ratha, head of the migration and remittances unit, at
the World Bank, said: “If you are waiting for the banks to cut the costs of
remittances, you're barking up the wrong tree.”

Dominic Thorncroft, chairman of UK Money Transmitters
Association, said his members were the “small community” enterprises that could
provide cheaper deals but they were being “excluded” by banks.

There was a consensus that regulations were needed to end
big banks’ exclusive deals in some countries –rather than to keep out small
operators.

Abdirashid Duale, chief executive of Dahabshill – a firm
specialising in sending money to Somalia – said: "It all started
with 9/11" – before explaining how regulations since the terrorist attacks
on the USA had made it very difficult for small firms to operate “even though
none of the hijakers were from Africa”.

It was agreed that innovation was needed to increase
competition and one African success story was being imported to Europe
according to Selma Ribica of Vodafone.

Mpesa – a person to person mobile money transfer system that
operates successfully in Kenya is going to be established in Romania.

Onyekachi Wambu, of Afford-Uk an African foundation
said migrants have no say about where there money is spent.